Mahindra First Choice Services entered into an asset acquisition agreement with the official liquidator of Carnation Auto (India).

YVS Vijaykumar, chief executive, Mahindra First Choice Services, told ET the Carnation brand carries a certain value they have nurtured well, and the company intends to use the brand in the coming years.

MUMBAI: In the first major move towards consolidation in the $7-billion Indian automotive aftermarket space, the country's largest organised vehicle service company Mahindra First Choice Services has acquired branding rights of former Maruti Suzuki's MD Jagdish Khattar-run Carnation Auto India Private Ltd, including some key assets, for an undisclosed sum.

The company entered into an asset acquisition agreement with the official liquidator of Carnation Auto (India). As a result, Mahindra First Choice (MFC) Services will acquire key assets of Carnation’s car-servicing business including the trademark ‘Carnation’, its website, software licences and workshop network. It will also drive MFC Services strategic vision of organising the unorganised Indian automotive aftermarket industry.

Khattar founded Carnation in 2008, a year after he retired from Maruti Suzuki with many reputed private equity investors including Premji Invest and Gaja Capital backing the venture. However, Khattar, who built a reputation as a manager who turned around loss-making state government enterprises, could not repeat the success as an entrepreneur.

Jagdish Khattar was unavailable for comment. This deal will lead to network expansion of potentially 100 outlets and service networks and help Mahindra accelerate its plan of having 1,000-1,200 outlets in the next three to four years.

On a growth path, Mahindra First Choice plans to raise Rs 120 crore through a private equity in the coming two to three quarters to sustain its growth of over 50% in coming years to attain a target of Rs 500 crore in turnover in the next five years. The company annually services about 4.8 lakh cars per annum with the acquisition of Carnation, it expects to service 6 lakh cars per annum.

YVS Vijaykumar, chief executive, Mahindra First Choice Services, told ET the Carnation brand carries a certain value they have nurtured well, and the company intends to use the brand in the coming years.

“The industry is ripe for consolidation in the aftermarket space; whoever attains scale will be the winner. Scale allows one to offer much better value proposition to customers and franchisees, helps procure parts at better rate and ensures it is available sooner,” said Kumar.

Amit Kaushik, managing director at consultancy firm Urban Science said Carnation is a strategic fit to Mahindra First Choice looking at the value proposition it offers. “This will enable Mahindra to increase their customer reach besides getting a substantial bunch of loyal customers those were happily visiting Carnation in recent years and resultant scale will only improve the operations,” added Kaushik.

This asset acquisition does not include the liabilities and past dues of CAPL currently under liquidation. MFC Services will now increase its penetration in metro cities, especially in Delhi, the NCR and Mumbai, which are strategic to its business growth plans.

The funds to be raised will also be used in the expansion into the two-wheeler service space, which the company recently diversified into. Mahindra First Choice plans to have over 2,500 outlets by 2022, which will offer an incremental growth opportunity for the company. The company is also sprucing up its digital infrastructure to ensure that it is able to participate in the growth opportunity presented by both brick and mortar and online platforms.

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